Save or Overpay

Accountant_Kerry

Hi All,

I am hoping for some advice, I am looking to move into a larger / more expensive property my previous deposit has been eaten up by the drop in house prices and my mortgage is about the same as the value of my flat.

Now do I save up a new deposit, or do I overpay my mortgage until there is effectively a deposit there for when I sell and just save enough to cover fees and stamp duty etc?

I have no penalties for overpaying and am on a SVR of 5.49%

Thanks

dimbo61

Hi Kerry you are going to struggle to get a rate of return from any kind of savings account ( short of £2,000 on the black dog at kempton dog track) to match your mortgage rate of 5.49%
Could you do both and overpay and save 50/50 this means you would have the cash to pay fees and build up a deposit as well as reduce your debt( mortgage).
Most lenders want at least 10% deposit to get a mortgage.
Can your income support a much bigger mortgage ? Dont forget lenders are being much more careful at the moment!

Accountant_Kerry

Hi Dimbo, Thanks for the reply.

My mortgage is £99k on a salary of £50k and the new mortgage I will be looking at is approx £180k after a 10% deposit which I should be able to save fairly quickly, about 7 months.

I was thinking of doing the half and half thing just wanted to gage opinions really.

SelbyJay_2

I'd save enough to cover your fees and then overpay the rest. The interest rate on the mortgage is much higher than anything you will get in a savings account, so it'll prob pay to chuck your extra money at the mortgage.